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“It’s an emotional and sensitive issue that I don’t feel has been put out in open discussion. Everybody knows about non-competes and nobody wants to talk about them,’’ said Kirk Palmer, of the executive search firm bearing his name. “In order to join a company, you have to sign a non-compete. There’s enormous pressure.”
According to Hal Reiter, chief executive of Herbert Mines Associates executive search, “Most of the time, non-compete provisions are very specific. They will say you cannot go to work for company A, company B and company C, for a specific period of time.” But sometimes the provisions are not specific, Reiter added, and that’s when they become difficult to enforce, leaving the courts to determine the competition.
“The reason any company enforces a non-compete is to demonstrate to all of their employees they will use every method they have at their disposal to prohibit an executive from violating an agreement that they executed,” Reiter said. “What good is it, if they don’t try to enforce it?”
Generally, non-compete clauses involve executives at the chief executive level down to general merchandise managers, though Palmer said the practice has been widening to the vice president and divisional merchandise manager levels. “There is a place for non-competes, at the ceo level. When you get down to the gmm level and below, it’s ridiculous.”
Currently, Saks Fifth Avenue is searching for a chief merchant. But non-compete clauses, according to industry sources, mean Saks can’t tap such logical places as Bloomingdale’s or Neiman Marcus. It’s also likely that Saks couldn’t tap May Co.
May, historically, has been aggressive in enforcing its non-competes, but it has a reputation for paying those who stay on very well. May sued Bon Ton when Heywood Wilansky, a former president and chief executive of Foley’s, was offered the same job at Bon Ton in 1995. The case was settled out of court. May also sued J.C. Penney when Linda Quick, a senior marketing executive, wanted to switch jobs. A trial date was set, but Penney’s decided it wasn’t worth the wait and hired someone else.